It's hard to compare India to any other country due to its structure: Amazon CFO

Amazon's massive investments Amazon in its Indian retail operations is becoming a drag on the margins of its international operations, CFO saidTNN | October 28, 2016, 12:11 IST

Amazon's massive investments Amazon in its Indian retail operations is becoming a drag on the margins of its international operations, CFO Brian Olsavsky told investors and analysts after the quarterly earnings.

He added that the fourth quarter will continue to see margin pressure. The company said that it is making investments to expand support selection, fulfilment network and Prime benefits including digital content.

Amazon bifurcates its global operations: North America and international markets. Amazon's international business loss was $541 million in the third quarter this year.

Responding to a question about the reason behind the losses in international business, he said: "By far the biggest individual thing is the investment in India that we continue to make and very excited about it...so that is essentially the international margin guidance in Q4. We are seeing expansion to support selection, expansion at fulfilment network increases. We're also investing in digital content and additional Prime benefits, fresh location Prime Now," said Olsavsky.

He added that the company is also beefing up its US supply chain network ahead of the holiday season - peak shopping time in the US. That has added to the drop in profits. Amazon is currently also making huge investments in its cloud service AWS, its main profit engine.

The company posted third-quarter revenue of $32.71 billion that beat market expectations while its net profit was $252 million, much below its previous quarter profits and Wall Street expectations.

During the previous quarter Amazon had reported $857 million in net profit. The shares were down by 7%. However the net profit was still up as compared to the corresponding quarter of last year when it reported $79 million.

Questions and comments about the growth in India have been a regular feature at Amazon's quarterly earnings briefings for the past few quarters. India was again the most mentioned country after the US.

During the previous quarterly results founder Jeff Bezos had singled out India for its growth in the country. Amazon has promised $5 billion investments in India, most of its for its retail operation where it competes with homegrown rival Flipkart.

To a specific question from an analyst on the stage in which the Indian market is, Olsavsky said that it is difficult to compare Indian market with that of any other markets owing to its peculiar nature and a marketplace model.

"It's hard to compare India to any other country. It's very different in its stage and structure. Being a third-party market has caused a lot of invention on our side. The team there in India has been very creative whenever they find a roadblock or something that has not existed in another country. They create it themselves, whether its delivery stations to working with small merchants -- you name it. So we're very happy with both the customer engagement that we're seeing and also the seller engagement which is very important in India and very pleased with the team that runs it over there and the way they work with teams throughout the world," Olsavsky said.

Amazon said that it is looking to produce original video content for Prime users as opposed to getting rights from other studios as it becomes difficult to licence for the various markets. Currently Prime video is available in four countries, the US, the UK, Germany and Japan.